Let’s end the year talking about trade

How to close out 2006? How about a post about trade? [Yeah, because you never write about that!!--ed.]: 1) In the lastest issue of Foreign Affairs, Rawi Abdelal and Adam Segal suggest that the tide has turned for globalization: Has the current age of globalization already started to come to a close? Will the process of integration continue, or will it grind to a halt? The paradoxical answer is neither of these scenarios. The technological revolution that has driven the current wave of globalization will continue. Communication will become still cheaper and easier, allowing corporations to spread their operations -- research and development, design, and manufacturing -- around the planet. Companies will exploit scientific talent in other countries to spark a new wave of technological innovation. At the same time, certain barriers will start to rise. The institutional foundations of globalization -- such as the rules that oblige governments to keep their markets open and the domestic and international politics that allow policymakers to liberalize their economies -- have weakened considerably in the past few years. Politicians and their constituents in the United States, Europe, and China have grown increasingly nervous about letting capital, goods, and people move freely across their borders. And energy -- the most globalized of products -- has once more become the object of intense resource nationalism, as governments in resource-rich countries assert greater control and ownership over those assets. This sounds about right to me -- provided there is no major shock to the system (cough, dollar crisis, cough). 2) One step forward, one step back on U.S. trade policy. Stepping forward, Cato's Dan Ikenson rejoices in a mundane, yet positive change in how the Commerce department calculates anti-dumping rates. If the policy change takes place, it would be a welcome falsification of Daniel Kono's powerful hypothesis about how democracies obfuscate their protectionist policies (see also: "hypocritical liberalization"). Stepping back, the Detroit News' Gordon Trowbridge reports on the Labor Department's willful negligence in implementing the Trade Adjustment Assistance program: [I]n a series of sometimes harshly worded opinions, the federal court that hears appeals of application decisions has criticized the Labor Department's administration of the program, accusing officials of shoddy investigations and blatant misreading of the law. "This is no longer people criticizing the Department of Labor for one or two cases. This is a systemwide problem," said Howard Rosen, a former congressional staffer who now heads an organization calling for changes in the trade adjustment program. Your humble blogger is quoted later in the story. Let's just say it takes a unique kind of incompetence to get me to agree with Sander Levin on anything. 3) Greg Mankiw cues me to a Washington Post op-ed by Senator Byron Dorgan and Senator-elect Sherrod Brown, "How Free Trade Hurts", in which a.... well, let's call it imaginative economic and historical analysis is put forward. Here's an excerpt: At the turn of the 20th century, child labor was common; working conditions were often abysmal; there were no enforced workplace health, safety or environmental requirements; no unemployment insurance; and no workers' compensation. Workers were attacked and killed for the sole reason that they wanted to form a union; there was no 40-hour week, minimum wage, job security, overtime pay or virtually any other limit on the exploitation of employees. America was split dramatically between the haves and have-nots. It was a harsh work world for many: nasty, brutish and, too often, short. Worker activism, new laws and court decisions changed all that during the past century.... The new mobility of capital and technology, coupled with the revolution in information technology, makes production of goods possible throughout much of the world. But much of the world at the beginning of the 21st century looks a lot like the United States did 100 years ago: Workers are grossly underpaid, exploited and abused, and they have virtually no rights. Many, including children, work 10, 12, 14 hours a day, six or seven days a week, for only a few dollars a day. The result has been a global race to the bottom as corporations troll the world for the cheapest labor, the fewest health, safety and environmental regulations, and the governments most unfriendly to labor rights. U.S. trade agreements paved the way for this race: While rejecting protections for workers or the environment, they protected investors and corporate interests.... We must insist that all trade agreements have labor, environmental and other protections so that American workers can compete on a level playing field. Trade agreements must also be reciprocal. The American market is the most desirable in the world. Every country wants access to it. That gives us a great deal of leverage, if only we'd use it. Barriers to U.S. products overseas should not be tolerated. Free-trade agreements have protected drug companies, international investors and Hollywood films, yet failed to protect our communities, our workers and our environment. We believe there is a better way. Fair trade is not the enemy of more trade. It's how we expand international trade without reversing U.S. economic progress. Oh, wow -- compared to these guys, suddenly James Webb looks like Cordell Hull. Mankiw addresses the historical questions, and a lot of other free trade bloggers pick at the remaining carrion. I've written previously about the dubious nature of the race to the bottom hypothesis. Indeed, I had updated and extended these arguments in the first draft of All Politics Is Global. Ironically, this section got cut from the final manuscript -- because the academic consensus is that the race to the bottom is so easy to refute, there was no point in devoting half a chapter to it. After reading Brown and Dorgan's op-ed, however, this chapter fragment seems worth resuscitating. So, for those people who still really, really believe that globalization leads to a race to the bottom -- click here. And for those Congressmen reading this -- go click over to this Greg Mankiw post and make the recommended resolutions.